18 OCTOBER 1924, Page 40




[To the Editor of the SPECTATOR.] SIR,—Nearly a twelvemonth ago the Conservative, Government sprung an unexpected Election upon the country, and one effect was to produce a disastrous fall in Stock Exchange securities. That I am dealing with facts and not with fancies may be gathered from records showing that the list of representative securities selected by the Bankers' Magazine exhibited between the end of October and the end of December last year a reduction in capital values of fully £150,000,000. Even the unex- pected Election itself occasioned a slump, and the fall became more pronounced when it was clear that Labour had gained so many seats at the Election as to render a change of Government almost certain. To-day, however, although securities declined a little for a time on the mere fact that a General Election is always disliked, as dis- turbing. to commercial and financial activities, we now find the stock markets apparently indifferent to the political outlook, while, on the whole, firmness charac- terizes most departments of the Stock Exchange. It may, therefore, fairly be asked whether these conditions reflect real indifference on the part of the City to the Election results. The answer is in the negative.

In the first place, it must be remembered that by tradition and instinct the City is still Conservative ; and while, therefore, it was a shock a twelvemonth ago to find that with so large a working majority Mr. Baldwin had decided to go to the country, the position is different to-day. Then it was felt—from the City's point of view—that any change was more likely to be for the worse than for the better. To-day, the reverse view is held, and although until quite recently the betting on the Stock Exchange has been in favour of a slight increase in the strength of the Labour Party, as a result of the Election, that is not the general view held in the City.

Therefore, the quietude and comparative steadiness of markets during this critical period must be attributed to the belief that at the worst (from the City's point of view) Labour will only come back to power as a minority Government, while it is more generally believed that the strength of Labour will be reduced. It is considered that Mr. Ramsay MacDonald has so far failed even to conceive anything in the nature of a constructive remedy for unem- ployment, and this, it is felt, may tell against him at the polls.

Moreover, rightly or not, as remains to be seen, the City believes that even the mass of the wage-earners of the country must be gradually finding out the weak point first in Lloyd Georgian and then, later, in Socialist finance in its relation to what may be termed the general well-being of the masses. I refer to the policy initiated by Mr. Lloyd George many years ago of bribing the pro- letariat with Doles, Pensions, Easier Hours of Labour, increased power to Trade Unions, and so forth, without any regard to the cultivation of conditions calculated to add to the real wealth-producing power of the country, without which all sections of the community must in due course suffer.

Only a week ago in these columns I drew attention to the fact that previous to the Lloyd George regime our Civil Service expenditure was about £82,000,000, whereas to-day, even excluding pensions arising out of the War, it is 1168,000,000. Nearly the whole of these huge outlays have been in the nature of unproductive expen- diture, and wh• will say that the erection of costly Ministries of Labour and other paraphernalia connected with Socialistic or semi-Socialistic government, has brought any increased prosperity to the country ? Labour departments and the Dole system have worked hand in hand-- with the - ea' canny policy -of the Trade Unions, and with capital penalized by severe taxation, with the capitalist and all that he stands for• discouraged and almost held up to obloquy, it is small wonder that reduced production at high costs and a consequent widening of the area of unemployment have been the outstanding characteristics of recentajears. It is only necessary to glance at successive Board of Trade Returns to see how this system of Doles and-unpro- ductive expenditure is affecting the solvency of the country. Notwithstanding the volume of unemployment, our imports continue to expand in striking fashion, but not so our exports, and for the first nine months of the current year we have an excess of imports over visible exports of £217,000,000. This represents an increase in the adverse trade balance over the previous year of 183,000,000, and over 1922 of 1102,000,000. Even when all allowance is made for invisible exports in the shape of freights and services, &c., this is a serious position. These are facts which the City believes are becoming

increasingly realized, and it is felt that, with each year that passes without any help towards solving the problem of unemployment from Socialistic finance, the chances

for sounder and better methods are increased. Nor, of course, have the Communist Party improved their chances —at least, so it is hoped—at the Election by their coming more boldly into the open as regards Socialistic plans, the latest item of which is the suggested nationalization of the Bank of England. Yet, as Mr. Hilton Young has wisely said in a recent letter to the Times :— "Socialist Governments which have held power since the war, in Russia and elsewhere, have appropriated accumulated savings, and reduced their countries to ruin, not so much by direct confiscationas by debasing the currency. They have taxed the savers into beggary by the inflation tax. It is a formidable weapon, fatally easy to wield, and hard to parry. The best defence for the community against that weapon is a bank of issue independent of the Govern- ment. We are the envy of the world in having, in the Bank of England, a bank of issue that is independent. Nationalize the Bank of England, make it a Government Department, and you deliver the nation up, without means of defence, into the hands of a Socialist Government, to be inflated into ruin by the debasement of the currency. That, it is to be supposed, is the significance of the proposal. This snare is set in our sight ; let us hope, in vain."

As the date for the Election approaches and the great issues depending upon it are more vividly realized, it seems likely that there will be not only a contraction of business, but possibly some sagging of values, due to nervousness with regard to results. For of one thing there is little doubt. If present expectations should be completely falsified, and if Labour should be returned with a working majority, there will be a very sudden change from apathy to something approaching acute, depression.—! am, Sir, yours faithfully, ARTHUR W. KIDDY.

The City, October 15th.